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Commodities like gold and oil get all the attention, but the next big profits will come from water companies. Picking up shares of the best water stocks to buy now could be the most lucrative move you make in your investing lifetime.
Investing in water stocks may seem counterintuitive, given its apparent abundance. But investors who buy water stocks know the truth. Water – at least, the kind of water necessary for human survival – is much, much scarcer than most people realize.
Now a handful of companies are becoming industry leaders in the race to solve the growing water crisis. Right now four stand out to us as giving investors some of the strongest profit opportunities on the market today…
Why Water Is the Ultimate Commodity
What makes the case for investing in water so compelling is how massive the problem is.
While water covers almost 70% of the Earth's surface, just 2.5% of that is the freshwater that humans need for drinking, bathing, cooking, and agriculture. And only a tiny portion of that freshwater – 1% – is readily accessible.
According to National Geographic calculations, the 7.5 billion people on the planet must make do with just 0.007% of its water.
And that vital water is not evenly distributed. The United Nations estimates that nearly 800 million people don't have clean drinking water and 2.5 billion don't have basic sanitation.
But the world doesn't have much time to address these issues. The UN estimates we'll have 40% less water than we need by 2030 unless action is taken. And it'll get worse, as the global population is expected to grow more than 29% to hit 9.7 billion by 2050.
Over the next 20 years, more money will be spent on water than on all other types of infrastructure except roads. The McKinsey Global Institute estimates $12 trillion will be invested in water through 2030.
The best water stocks to buy are the companies best positioned to provide the solutions to these problems. These stocks will be first in line to reap profits from this massive wave of spending.
We've found four water stocks that fit the bill. They cover four broad areas of water investing: utilities, technology, services, and infrastructure.
Take a look…
The Four Best Water Stocks to Buy in 2017
Best Utility Water Stock to Buy: American Water Works Co. Inc. (NYSE: AWK)
America Water Works is America's biggest publicly traded water utility. It serves 15 million people in 47 states and Ontario, Canada. That size and reach has helped AWK achieve impressive economies of scale.
This water stock's impressive performance has made it an investor favorite. In fact, it's been a core pick in our parent company's flagship publication, the Money Map Report, since December 2011.
AWK was chosen because it fits with Money Morning Chief Investment Strategist Keith Fitz-Gerald's strategy of investing in "Unstoppable Global Trends." In the case of American Water Works, those trends include demographics and scarcity/allocation.
"American Water Works is a rock-solid choice that will shield you from market volatility," Fitz-Gerald said. Since he first recommended AWK, the stock has gained 165%.
It's definitely been a long-term performer. American Water Works stock is up 275% over the past decade.
And that doesn't even include the steady dividend, which currently yields about 2%. The company just announced a 10.7% dividend increase. AWK has boosted its dividend every year since its IPO in 2008, a habit every investor will appreciate.
But it's not too late to invest in AWK stock because the growth story for this Voorhees, N.J.-based water utility is far from over. According to Morningstar, analysts estimate American Water Works' earnings will grow 7.9% a year for the next five years.
According to FactSet data, the company's earnings per share (EPS) will be $3.76 in 2020. Even if the price-to-earnings (PE) ratio drops a bit from 30 currently to the mid-20s, that would put the share price at about $95, a 19% gain.
Throw in the dividends – they should continue to rise as the payout ratio is just 55% - and you have a potential four-year total return in the 28% range.
These other three water stocks are just as impressive…
About the Author
Dave has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.